Benzinga | Jul 1, 2021 06:47AM EDT

ITT Announces Sale of Subsidiary Holding Legacy Liabilities to Delticus

ITT Inc. (NYSE:ITT) today announced that it has divested InTelCo Management LLC ("InTelCo"), a wholly owned subsidiary that holds long-term liabilities including asbestos liabilities and related insurance assets, to Delticus HoldCo, L.P. ("Delticus"), a corporate liability consolidation vehicle and portfolio company of Warburg Pincus LLC, a leading global private equity firm.

"Today's announcement represents the culmination of our multi-year strategy to reduce ITT's legacy liability profile," said Luca Savi, ITT President and CEO. "This transaction, along with our successful U.S. pension plan termination executed in October 2020, position us very favorably for future growth and capital flexibility."

Savi continued, "The transaction allows ITT to permanently divest its legacy asbestos liabilities and transfer these to a high-quality partner in Delticus. ITT will operate with a simplified and well-capitalized balance sheet, a heightened focus on our core business, including our sustainability initiatives, and without the risks and management time required to manage long-term asbestos liabilities. Going forward ITT will be able to more effectively invest capital and future cash flows into product innovation and organic and inorganic growth initiatives."

The estimated impact of the divesture will be a one-time after-tax loss of approximately $27 million to be recorded in the second quarter of 2021 and excluded from adjusted earnings per share.

Transaction Overview

Delticus has acquired 100% of the equity of InTelCo, which indemnifies ITT for all legacy asbestos liabilities. At closing, ITT contributed approximately $398 million in cash to InTelCo. As a result of the transaction, ITT removed all asbestos obligations, related insurance assets and associated deferred tax assets from the company's consolidated balance sheet.

Delticus will assume the operational management of InTelCo, including the administration of all the asbestos claims and collection of existing insurance policy reimbursements.

Evercore acted as exclusive financial advisor to ITT in connection with the transaction, and Simpson Thacher & Bartlett LLP served as its legal counsel. Jefferies acted as exclusive financial advisor to Delticus, and Kirkland & Ellis LLP served as its legal counsel.